The Folly of Subsidies for the Arms Pushers


November 10, 1993|By ROSY NIMROODY

NEW YORK — New York. -- Four years after the fall of the Berlin Wall, the U.S. military industry's response to new post-cold-war economic realities is to keep pushing old answers: an all-out effort to capture the weapons-export market. And to ensure that the market remains an open one, it is campaigning for the creation of an arms-export subsidy fund.

Last February, the chairman of Raytheon and eight other major defense contractors wrote to Secretary of Defense Les Aspin urging him to set up a credit-guarantee program for arms exports on the ground that it would reap economic benefits.

When a proposal to use $5 billion out of defense-conversion coffers for export loan guarantees was rejected, the defense industry began to lobby for a compromise proposal by Sen. Dirk Kempthorne, R-Idaho, diverting $1 billion from non-conversion accounts within the Defense Department budget for loans to subsidize arms sales to NATO, Australia, Japan, South Korea and Israel.

Supporters of the amendment argue that it would make United States arms manufacturers more competitive and merely ''level the playing field'' with America's main industrial competitors, most of which have export credit agencies that finance military sales. Yet without any additional financing mechanism, the U.S. already is the world's No. 1 arms dealer.

According to the Stockholm International Peace Research Institute, the U.S. delivered more than 45 percent of all major combat systems sold worldwide in 1992, more than four times higher than either of its two closest competitors, Russia and Germany. Its share of the Third World arms market is even greater, doubling over the last five years from 28 percent to 57 percent.

Even without loan guarantees the United States has what Rep. Howard Berman, D- Calif., calls ''a military assistance program that dwarfs any other country's foreign-export financing.'' Most of this fiscal year's $3.4 billion program is in the form of direct grants to foreign governments, generally restricted to purchases U.S.-built weapons. Another $2.5 billion in economic-support funds also can help overseas clients buy U.S. weapons.

The arms industry also claims that an export loan-guarantee program is a good jobs program. Touting Senator Kempthorne's provision as a ''blue-collar amendment,'' defense contractors argue that it holds the promise to maintain jobs and reduce unemployment compensation while arms manufacturers make a transition to commercial endeavors. The Aerospace Industries Association boasts that for every $65 million in budget authority (necessary for $1 billion in loan guarantees) 35,000 jobs will be generated or maintained.

But if jobs and workers really are the concern, the export-assistance money will be better spent by directly aiding workers whose jobs are threatened by defense cutbacks. In addition, an industrial policy designed to develop the civilian sector would create an equal or greater number of jobs than arms exports. According to a recent report by the Congressional Research Service, $3 billion spent on state and local government services would create 12,000 more jobs than spending the same on the military.

The argument that money from subsidized arms sales can be used for conversion purposes to help ease the pain of adjusting to the post-cold-war era is also ill-taken. As one critic put it: ''Paying for defense conversion with arms-sales profits is like underwriting an addict's rehab with cash generated from drug deals.''

In addition, debt relating to military procurement is the easiest kind not to pay, especially when the buyer is expected to join the supplier country in military action. Egypt, for example, was exempted from paying its $7 billion debt in 1991, leaving taxpayers to pick up the tab.

Commercializing arms transfers through export loans is particularly dangerous in a world where more than four dozen ethnic and territorial conflicts are under way. Under the current conditions for a ''buyers' market,'' where countries can receive better equipment at cheaper prices, regional arms races can be easily provoked. As Rep. Thomas Andrews, D-Maine, explained: ''By selling arms to other nations, especially to Third World countries, we're throwing gasoline on the fire of regional conflicts. We're also taking precious money desperately needed to deal with the underlying causes of tensions in these countries -- economic problems -- and ignoring them and investing in weapons instead.''

It is time the defense industry heed Under Secretary of Defense William Perry's warning that relying on arms exports to cushion the effects of declining defense budgets will only result in ''postponing the consolidation and downsizing their industries should be going through.'' Congress should once again reject a pro-export amendment.

Rather than encourage the spread of deadly weapons to poor countries through loan guarantees, the U.S. should take the lead to end government financing of arms exports by all the major exporting countries.

Rosy Nimroody, a research associate of the Arms Transfer Control Project at the World Policy Institute, wrote this commentary for the Christian Science Monitor.

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